Floridians could face a $300-a-year ‘hurricane tax’ during storm season
New plans being considered in Congress would drive up insurance rates for Floridians and spell disaster for Florida’s precariously positioned property insurance market.
Lawmakers in Washington, D.C., are discussing plans that could result in skyrocketing insurance rates for Florida homeowners.
Specifically, a hit to the state’s little-known reinsurance market would effectively impose a “hurricane tax” on Florida’s property owners of up to $894 million.
How reinsurance tamps down costs
Living in a hurricane-prone area like Florida means insurance rates are already high.
But one way those costs are kept as low as possible is through reinsurance, where insurance companies take out insurance themselves to protect their company’s risk. Right now, 32 of the top 38 insurers in Florida are based outside of the country.
Reinsurance is a way to pool risk (and, therefore, losses) around the world. As the Association of Bermuda Insurers and Reinsurers explains, “the ability to pool US hurricane and earthquake risks with the risks for typhoons in Japan or earthquakes in Latin America means coverage costs less than it would without reinsurance.”
How Congress could hike costs
The first of two plans that could affect Florida insurers is the “Made in America” tax proposal, which would establish a minimum tax rate of 15% to 21% intended to discourage businesses from moving abroad to enjoy lower tax rates.
The second piece is the Stopping Harmful Inversions and Ending Low-tax Developments, or SHIELD, Plan – which would force companies headquartered abroad to pay the difference in tax rates, leading to a tax rate of 28%.
Taken together, prices would be bound to skyrocket for Florida property owners and renters already grappling with a bevy of insurance marketplace challenges.
Should these plans pass, insurers would be less likely to invest in reinsurance, passing that cost along to the consumer instead. Experts predict Florida’s property insurance premiums would increase by $639 million to $894 million should this measure pass.
“Instead of a misguided proposal to increase revenue to our country,” said Carolyn Johnson, senior policy director at the Florida Chamber of Commerce, “our nation’s leaders should focus more on reducing expensive, burdensome and duplicative regulations and decreasing taxation to become more competitive and attractive to businesses like Florida has done for years.”
Floridians should be able to protect their families and property without breaking the bank. The solution already exists – share the risk outside of the United States.
These plans would remove that key option, leaving consumers on the hook for hundreds of millions of dollars in increased insurance premiums for the same level of coverage.